Membership Marketing – It’s a Jungle Out There

This week’s blog extols the benefits of membership schemes and offers some of our learnings for those managing them.

“I refuse to join any club that would have me as a member”

So said Groucho Marx. These days however it would appear that the nation very much wants to belong to clubs. We may not all be able to join our political leaders at the Bullingdon reunion but from the private members clubs around Britain’s cities, to the arguably even more exclusive knitting circles and allotments of Stoke Newington, the trend is a positive one. And the growth of cultural memberships is no exception.

As funding cuts bite, museums, galleries and heritage sites in particular can ill-afford to ignore the benefits that such schemes provide, especially given their contribution to the bottom line. It was only a year ago the last of the gallery big-hitters, The National Gallery, joined the fray with their own scheme. In the words of Director Nicholas Penny: “We have done a tremendous amount of research [conducted by Muse] and we are very confident this is something people will go for.” And even free-to-enter organisations are developing membership schemes, recognising that whilst memberships play an important role in terms of binding audiences to the organisation in general, they also present a huge opportunity to generate revenue indirectly through database management, content marketing and specialist secondary spend opportunities.

Learnings

No surprise then that this week team Muse was presenting at the Ambassadors Lounge in London’s Lyceum, currently home to The Lion King, on the subject of best practice in researching optimal cultural membership packages courtesy of our good friends at the Membership Management Forum.

Below we have summarised our presentaion from the day, based on our recent research into membership schemes and prices. The work also used econometric modelling to forecast revenues and optimal price points. The techniques used are best in class techniques used by best in class consumer goods organisation:

Recency of visiting is very influential on membership uptake. This is obvious to a degree, but just how significant it is, is maybe not so obvious: people who visited in the last year are five times more likely to join than people who visited one to two years ago and twenty six times more likely than people who visited two to three years ago.

Membership schemes are price sensitive: higher prices can lead to significant decreases in total revenue. See the chart below as example:

In the case above revenue almost halves if the membership fee increases from £30 to £50, and at £60, revenue is less than 25% of the revenue generated at £30.

In general membership schemes tend to be priced at a level that does not optimise revenue: they are priced at too high a level, therefore supressing uptake. We looked at three existing membership schemes and all of them were overpriced from a revenue maximisation perspective. On average revenue was at a level 25% less than the optimal pricing.

A number of commonly offered benefits have very little financial value to members.

Very few venues offer benefits that differ significantly from other membership schemes, despite the fact that members and potential members have unmet membership needs that are not being offered by anyone. We suggest that there may be too much attention paid to what other membership schemes offer than to what consumers want?

Membership schemes that do not offer free entry or similar can still be very financially worthwhile for the organisation. If correctly priced, revenues are likely to be approximately 50% of comparable schemes that offer free entry or similar.

The returns on a proper econometric approach to pricing membership vastly outweigh the cost. A recent membership project we conducted based on econometrics arrived at a scheme that will generate approximately £250,000 more revenue than a scheme based on what similar organisations offer. This represents a return of over 1,000% versus the project cost.

It appears that the better the quality of the benefits then the greater the revenue. This may appear obvious, but it can easily be the case that people will not pay extra for more. However, in the membership sector there appears to be a direct correlation between benefits and revenue. Here is the indexed revenue from a recent membership scheme project where several tiers of benefits were evaluated:

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